Sustainable business opportunities in Uganda

artikel
Gepubliceerd op 01-12-16, door Grensverleggers Redactie

Uganda is being heralded by a growing number of companies as an excellent destination for sustainable business opportunities. This east-African country boasts a young population with an entrepreneurial spirit, stable political climate, excellent weather conditions, beautiful nature, fertile farmlands and more. Are Dutch companies paying enough attention?

Last summer, the Dutch Embassy in Kampala invited CSR Netherlands to conduct a research into the unique opportunities and challenges of doing sustainable business in Uganda. CSR Netherlands discovered a country full of potential, but also with some distinct challenges. The Embassy, CSR Netherlands and local stakeholders are ready to help any Dutch companies with building a successful sustainable business in Uganda.

Read the full report: CSR Country Scan Uganda

What is perhaps most striking about Uganda is its entrepreneurial gusto. The country has risen this year to 12th place out of 48 African economies for ease of doing business. It’s even heralded by the World Economic Forum for its high number of self-employed people (28% of the working population), indicating an entrepreneurial spirit in this once suppressed country.

Opportunities

“This country offers many opportunities to foreign companies and investors”, says Jorn Leeksma of the Dutch Embassy in Kampala. He is convinced Dutch entrepreneurs can find success in Uganda. “Especially in agriculture, tourism and clean energy. Uganda has lots of very fertile farmland and a mild-warm climate with plenty rain. Well-managed farms can reach up to three yields a year.”

Fifty to a hundred Dutch companies have already discovered Uganda. Among them are two of the biggest tour operators in the country. “Tourists are starting to appreciate the beautiful nature here. In recent years the number of visitors has been growing. They come to see the ‘Big 5’, among other things, but also the unique mountain Gorilla, that lives in the rainforest on the border with Rwanda.”

Willem Nolens from SolarNow has been selling solar home systems in Uganda since 2011. He agrees Uganda is a good place to do business. “There is an enormous demand for reliable solar energy solutions in Uganda”, he says. “Only 8% of the population has access to electricity. Four million households still use kerosene lamps, diesel-generators and batteries for their radios.”

That’s not only bad for the environment and people’s health, but also quite expensive. "Solar energy is cheaper and better for the environment. Additionally, households that get our solar home system often gain access for the first time to television and the internet. That helps people get more connected to civil society, especially women and children.”

Solar energy also helps farmers increase their productivity. “Yields can be increased by solar-powered water pumps and cooling systems. These systems generate more income for the farmer and increase economic growth, employment and food security.”

Favourable business conditions

Leeksma emphasizes Uganda’s favourable business conditions. “Ugandans are overall a friendly, open-minded people. Public life and travelling are safe and relatively comfortable. The political and cultural climate is quite stable. Joseph Kony’s infamous Lords Resistance Army has been wiped out years ago.”

Another potential benefit is the low cost of production in Uganda. One of the main reasons behind this is the fact that Uganda has no minimum wage. This benefit can easily lead to worker exploitation and poverty though: a serious CSR-risk. Companies must therefore see to it that they always pay their employees a living wage.

Challenges

Uganda has its fair share of business and CSR-challenges. One of the main hindrances is corruption. “This is something many companies encounter in their daily business”, Leeksma says. “It occurs in every level of government. Entrepreneurs have to find ways to deal with it without incriminating themselves. Many seek help from a local agent or business partner. The Embassy is also ready to help. A phone call or note from a Dutch government official to the right person can make all the difference.”

Getting your stuff in and out of the country can be another challenge. “Road transport to the nearest port – Mombassa in Kenya – can be time-consuming and unpredictable. Custom officials are not always helpfull. Unpredictable quality controls may hold up your goods at the border for unnecessarily long times.

In general government policies can be quite unpredictable, says Nolens. “This is one of the biggest risks of doing business in Uganda. Especially the ever-changing tax policies can leave your business vulnerable to sudden new tax assessments, even retroactively.”

David Katamba, director of the Ugandan Chapter for Corporate Social Responsibility Initiatives (UCCSRI) calls it 'doing business amongst irresponsible players'. This kind of players can also include companies and employees. “Competitors might not adhere to the same CSR-standards as you. Also, worker loyalty can be low. If some other company pays more, you might find your workers gone the next day.”

That’s not to say Katamba doesn’t see opportunities for sustainable business in Uganda. Quite the contrary. “Although there yet may be little institutional benefits for CSR, there is a large and ever increasing local and international market for sustainable goods and services and inclusive business models. On the local market, especially education and the health sector are growing markets for sustainable goods and services.”

Nolens has some sound advice for other entrepreneurs considering coming to Uganda. “If you want to do business in a country like Uganda, you shouldn’t complain about the average worker’s training level, or unpredictable government rules, or even untrustworthy employees. In the wrong kind of circumstances, any employee can make a wrong decision.”

The challenge is accept the circumstances and to adapt yourself to them. If you meet failure in your daily business, question yourself, not your environment. The biggest mistake most expats make is they become micro-managers trying to prevent adversities, all the while losing sight of the bigger picture. Instead, work with what you have. Delegate. If you learn to do that, success is here for the taking.”

Favourable conditions for doing business in Uganda

  • Young, open-minded population with an entrepreneurial spirit
  • Politically, culturally and socially stable
  • English-speaking
  • Getting around is comfortable and easy
  • Mild-warm stable climate with plenty sunshine and rain
  • Extremely fertile farmlands
  • Beautiful flora and unique fauna

Priority CSR-issues

  • Poverty. Although the poverty rate is declining, almost 20% of Ugandans live in poverty still.
  • Child labour (occurs mostly in agriculture)
  • Poor healthcare
  • Skills development and education. Education level is lower than in neighbouring countries like Kenya
  • Corruption: high tax rates, lack of access to finance, inflation
  • Absence of a minimum wage, exploitation
  • Environmental challenges: land and soil degradation, deforestation, pollution, poor disposal of (industrial) waste.
  • Pollution, water use, decline of national parks, due to the energy sector. Limited access to energy.
  • Declining biodiversity, loss of habitat for plants and animals
  • Introduction of renewable energy.
  • Land rights, animal welfare, pollution (by plastic debris for instance), worker conditions (in the tourism sector)
  • Land and soil degradation because of soil erosion, deforestation and pollution costs 12% of Uganda’s annual income.
  • Depletion of water resources, which is leading to local conflict

Organisations that can help

Photocredit: DFID (CC by 2.0)



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